The Premier Investor Network Sunday 11-16-2003
Special Alert from:
Option Investor Newsletter
Nikkei 10,000, Dow 9000 ?
Investors have been hoping to see Dow 10,000 for several
weeks now as each successive rally gets closer to that
elusive goal. The underlying bullish sentiment to the
market has been off the scale despite a mostly sideways
move for the last month.
Readers of the Option Investor Newsletter have been kept
abreast of the market technicals and market sentiment
with our nightly market analysis.
Over the last couple of weeks I have warned readers that
there could be a crisis coming. We have discussed the
conflicting economic reports and the numbers that seem
too good to be true.
One of the numbers most alarming was the VXO. This is
the old market volatility index and an expression of
market sentiment. This index has been trading in the
17.50 range and below and at a FIVE YEAR LOW. The
current readings are well below levels reached during
the tech bubble and are indicating bullish sentiment
higher even than 1999 and 2000.
This is very dangerous territory and is the equivalent
of walking a tight rope over Niagara Falls. The smallest
slip can cause serious consequences. Investors never
know where the next news event is coming from or what
ill wind will push the market off balance but when the
VXO is that low any potential market event is magnified.
That slip has been brewing for over a week in Japan.
The Nikkei was trading over 11,000 just a couple weeks
ago and at new highs for this cycle.
On Sunday night the Nikkei dropped -370 points in the
morning session to 9,786. This is nearly -1500 points
off the highs in just a couple weeks. This is the first
time it has traded under 10,000 since August 18th. The
reasons given were the over extended Dow, over extended
tech stocks, currency jitters over the Yen's rising
value and the chance of higher inflation in the U.S.
While I do not believe all the official reasons it does
not matter to U.S. investors. The reasons never matter
when the markets are priced to perfection and investor
sentiment is off the scale. It is simply the final straw
that causes the selling momentum to increase.
The other wild card for Monday is the SEC announcement
about a new Mutual Fund Scandal. Who, what and how will
be laid out in the SEC press conference Monday. Can the
market stand even more bad news?
For readers of the Option Investor Newsletter we continue
to keep them appraised of the short and long term outlook.
The purpose of this letter tonight is to warn you of a
possible market event and to put your mind at ease.
While the market may be over extended it still has farther
to run. It may not look that way on Monday as the U.S.
markets should open down on the Japanese news. How far
down is unknown but Dow 9725 is strong support. Should
that level break then 9600-9650 is even stronger support.
The Nasdaq is at strong support of 1930 with 1900 the
next strongest level. We expect those levels to be bought
and provide strong support for a potential rebound.
The week before Thanksgiving is typically bullish and
the S&P has gone up each of the last ten years. A very
strong record and one that should continue. No one can
guarantee that the market will rebound quickly from this
dip but the underlying sentiment has not changed. Until
that sentiment changes each dip will continue to be
bought and produce profit for the bulls.
Investors should make their own decisions about when
to enter and exit the markets. They should make those
decisions based on the best information at hand. We
believe that the Option Investor Newsletter provides
that information to thousands of active investors each
day. If you would like to benefit from that kind of
market insight please visit us soon.
Enter Very Passively, Exit Very Aggressively!
Jim Brown
Option Investor Newsletter
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